Do startup layoffs have more to do with fund crunch than employee performance?

Some allege companies are adopting unprofessional ways of getting people to leave so that they don't have to compensate those being laid off.John Sarkar&Digbijay Mishra | TNN | July 30, 2016, 18:42 IST

Pink slips are flying thick and fast at startups and Internet-based companies across the country.

Companies say they are letting go of their poorest performers based on periodic assessments. Employees say the layoffs have more to do with the fund crunch at startups than performance.

Some allege companies are adopting unprofessional ways of getting people to leave so that they don't have to compensate those being laid off.

An employee at a startup in Noida said he was stunned when he was suddenly handed over a new set of performance goals, which were tough to meet.

A week later, he, along with some 150 others, were asked to leave the company for non-performance. "It was impossible to meet those new parameters," the employee told TOI. "The irony is, we had great appraisals a few months ago."

An employee at another company had a similar story. He said he was being appreciated for meeting 60% of his targets. But suddenly his manager told him he needed to hit 90%. "This created immense pressure. You eventually end up resigning. That saves the management the trouble of calling it a layoff," he said.

Flipkart said when employees do not meet the performance bar, the company works with them closely to help them improve their performance. "In due course, if these employees are unable to make the desired progress, they are encouraged to seek opportunities outside the company where their skills can be better utilized," it said.

Snapdeal said all team members have clear measurable goals, which are discussed between them and respective managers.

"Where gap is observed between stated expectation and delivery, the same is discussed and the team member is given both training and opportunity to upgrade performance," the e-tailer said.

Kunal Sen, VP at HR services company Teamlease, says these sorts of layoffs are different from what happens at established companies where there is a process for such exigencies.

"Once a decision has been taken on who should stay and who should go, the HR collects data on the individual for multiple years. There is an effort to redeploy the individual within the company. And even if that doesn't work out, outplacement firms come into play," he says.

Those laid off are also invariably given significant compensation - normally a minimum of three months' salary. Kamal Karanth, MD, India, Kelly Services & KellyOCG, says arbitrary methods are adopted partly because of the immaturity of founders.

"Investors are breathing down the necks of startup founders, who have bright ideas but no experience when it comes to running a company and motivating people. Also, most startups don't have high-profile HR leaders who can put their foot down and ask for more time for employees," he says.

However, a senior executive at a Gurgaon-based startup responsible for recently firing employees said layoffs at startups is not as one-sided a story as the employees would like to believe.

"People who join startups know the risks involved. They come here for quick growth and to do things they would never have been able to at a big company," he said, adding resource- constrained startups have little choice in the matter.

"Startups don't have the money to have large HR departments. Neither do they have funds to hang on to employees if a process has to be shut down. We have to move fast, and to do that, we have to take tough decisions quickly," he said.